Updating the Definition of "Fiduciary" Under ERISA

EBSA is seeking to amend a 1975 regulation, which defines when a person providing investment advice becomes a fiduciary under ERISA, in order to adapt the rule to the current retirement marketplace. The proposal's goal is to ensure that potential conflicts of interest among advisers are not allowed to compromise the quality of investment advice that workers rely on.

In October 2010, EBSA issued a proposed rule to update the definition of "fiduciary" to more broadly define the term as a person who provides investment advice to plans for a fee or other compensation. The decision to re-propose the rule is in part a response to requests from the public, including members of Congress, that the agency allow an opportunity for more input on the rule.

EBSA to Re-Propose Rule on Definition of Fiduciary in Early 2012

EBSA anticipates revising provisions of the rule including, but not restricted to:

Clarifying that fiduciary advice is limited to individualized advice directed to specific parties, responding to concerns about the application of the regulation to routine appraisals; and

Clarifying the limits of the rule's application to arm's length commercial transactions, such as swap transactions.

Also anticipated are exemptions addressing concerns about the impact of the new regulation on the current fee practices of brokers and advisers, and clarifying the continued applicability of exemptions that have long been in existence that allow brokers to receive commissions in connection with mutual funds, stocks and insurance products. EBSA intends to craft new or amended exemptions that can best preserve beneficial fee practices, while at the same time protecting plan participants and individual retirement account owners from abusive practices and conflicted advice.

Additional Information

For more information concerning the proposed changes to the definition of a fiduciary, please click here. You can read more about fiduciary duties under ERISA in the HR360 section on Fiduciary Duties under Retirement Plans.